A government scheme aimed at kick-starting the housing market by underwriting 95% mortgages will be available to people spending up to £500,000 on a new-build property, the housing minister has announced.

The NewBuy Guarantee scheme, which will be launched in March, will allow lenders to offer large mortgages on new-build homes without taking on all of the risk: they will be guaranteed not to lose money if the property falls into negative equity and is repossessed, with the mortgage indemnity funded by developers and taxpayers.

The scheme had been heralded as a way to get first-time buyers back into the market, with the prime minister suggesting it could help 100,000 buyers frozen out by a lack of finance.

Unveiling more details, housing minister Grant Shapps said he wanted to "go the extra mile" for those aspiring to get on the housing ladder. He said that while buyers typically needed to raise £40,000 to put down as a deposit, this could help those with just £10,000 to buy a home of their own.

Details of the scheme confirm it will be open to all buyers, not just those looking for their first home, and reveal it can be used on new-build houses and flats costing up to £500,000 – considerably more than the average first-time buyer price. The only criteria imposed by the government is that borrowers must be UK citizens and the property they are buying must be their main home.

Although there are just weeks to go until the scheme launches, Nationwide building society, one of the lenders which will take part, said it is still working with the government to work out exactly how it will operate.

The Council of Mortgage Lenders said discussions about the scheme were ongoing, and when the final details were announced the £500,000 cap could vary around the country.

Spokeswoman Sue Anderson said lenders were drawing up plans for mortgages, but it was unclear whether they would be able to offer loans more cheaply under the scheme.

She said: "While it is easy to ally this scheme with first-time buyers who are struggling to get on the housing ladder, our research shows there are a lot of people who cannot move house because their equity has been eroded. They make up a chunky part of the market."

Shapps also announced he had identified enough government land to build 80,000 homes and was working with organisations including the BBC and Royal Mail to find more to increase that number to 100,000 homes by 2015.

"The pattern of the past has been to produce endless policies and initiatives that simply gather dust on Whitehall shelves and lead to inaction and inertia," he said. "But with the prime minister putting housing centre stage on the road to economic recovery, I am determined we shall not repeat these mistakes of the past."

The announcement on NewBuy, which was previously referred to as the mortgage indemnity scheme, was welcomed by property firm Countrywide.

Its chief executive, Grenville Turner, said: "As deposit affordability continues to be one of the most restrictive barriers to purchasing a property, we are seeing a greater level of competitiveness from lenders in the higher loan-to-value mortgage range, and opening up the restrictions on prospective buyers who can access the NewBuy guarantee scheme can only be a good thing for the market."